Multiple Choice
An actual exam from a
semester in the past. Note that questions 30 - 40 concern
chapter eight. Our second exam covers only chapters five
through seven.
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1.
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Which
of the following is not true regarding a change in quantity
demanded?
A. A change in quantity demanded is shown by a movement along a
given demand curve. B. The demand curve shifts whenever the quantity demanded
changes. C. A change in the price of a good, other things constant, will lead to a
change in quantity demanded. D. The lower the price of a product, other things
constant, the higher the quantity demanded. E. A shift in the supply curve might
cause a change in quantity demanded.
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2.
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If
the government imposes a ceiling price on apartment rents, we would expect to observe all of the
following except one. Which is the exception?
A. an
increase in the number of new apartment complexes being built B. long waiting lists
for apartment seekers C. lower maintenance of existing apartments
D. conversion of some apartment complexes to condos E. a shortage
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3.
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In
which of the following situations will the effect upon the equilibrium price of wheat be
indeterminate?
A. supply decreases and demand increases
B. demand decreases and supply increases C. demand remains constant and supply
increases D. supply decreases and demand decreases E. supply
remains constant and demand increases
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4.
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A
country should export only those goods for which, relative to its trading partners, it has
the
A. absolute advantage B. highest opportunity cost
C. lowest production possibilities D. strongest demand
E. lowest opportunity cost
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5.
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International trade does all the following except
A. allow a
country to specialize in producing certain goods and services B. reduce world
output C. allow a country to move to a higher consumption possibilities
frontier D. allow a country's consumption possibilities frontier to lie outside its
production possibilities frontier E. increase world output
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6.
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The
opportunity cost of producing one car in Assam is 2,000 bushels of wheat, and the opportunity cost of
producing one car in Bihar is 1,200 bushels of wheat. The two countries can realize mutual gains from
trade if they agree on terms of trade that are
A. greater
than 2,000 bushels of wheat per car B. less than 1,200 bushels of wheat per
car C. greater than 1,200 bushels of wheat per car and less than 2,000 bushels of
wheat per car, and Assam produces wheat D. greater than 1,200 bushels of wheat per
car and less than 2,000 bushels of wheat per car, and Assam produces cars E. greater
than 1,200 bushels of wheat per car and less than 2,000 bushels of wheat per car, and each country
produces both goods
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7.
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The
price elasticity of demand is equal to the slope of the demand curve.
A. True B. False
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8.
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Firms
would like to know the price elasticity of demand for their product because it helps determine the
effect of price changes on the firms'
A. property
taxes B. profits C. quantity supplied
D. revenues E. total costs
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9.
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A
good synonym for elasticity would be
A. stability
B. volatility C. stickiness D. demand
E. responsiveness
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10.
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A
good whose price represents a very large percentage of the consumer's budget will tend to
have
A. more elastic demand B. a perfectly elastic demand
C. more inelastic demand D. an upward-sloping demand curve
E. very many substitutes
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11.
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If
price increases from $45 to $55, the market quantity supplied increases from 20 units per week to 30
units per week. The price elasticity of supply is
A. 1/2 =
0.5 B. 1.0 C. 11/6 = 1.8333 D. 9/4 =
2.25 E. 2.0
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12.
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Along
a linear demand curve, as the price rises, demand becomes more
A. steep B. elastic C. inelastic
D. unit elastic E. variable
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13.
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Both
income elasticity of demand and cross-price elasticity of demand coefficients can take on negative,
zero, or positive values.
A. True B. False
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14.
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As
cities prospered and per capita incomes increased, the demand for bus travel diminished. This
suggests that
A. cities could raise revenue by increasing bus fares
B. the demand for bus travel is price elastic C. bus travel and automobile
travel are complements D. bus travel is an inferior good E. bus
travel is a luxury
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15.
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Based
on the information in Exhibit 0060, we can determine that the demand for the good is __________ and
an increase in price from $40 to $60 per unit will __________ total
revenue.
A. unit elastic; increase B. elastic;
decrease C. unit elastic; not change D. inelastic;
increase E. elastic; increase
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16.
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Price
elasticity of demand and price elasticity of supply are both influenced
by
A. the availability of close substitutes for the product B. the
proportion of the consumer's budget spend on the product C. the length of the
adjustment period considered D. technological conditions such as the additional
costs of increasing production E. none of the above
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17.
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Two
friends, Diane and Sam, own and run a bar. Diane tends bar on Monday, Wednesday, and Friday and
receives a wage in addition to tips. Sam tends bar on Tuesday, Thursday, and Saturday and receives
only tips. Which of the following represents an implicit cost of operating the
bar?
A. Diane's wage B. Sam's time C. Diane's
tips D. Sam's tips E. both Diane's and Sam's tips
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18.
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The
marginal product of labor is the
A. cost of one worker B. average
output per worker C. change in revenue from selling one more unit of
output D. change in revenue from using one more unit of labor
E. change in output from using one more unit of labor
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19.
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When
marginal product is decreasing, marginal cost is
A. less
than zero B. equal to zero C. constant
D. decreasing E. increasing
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20.
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The
graph of average fixed cost is a horizontal line.
A. True B. False
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21.
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What
is the price elasticity of supply between $20 and $40 on supply curve S' in Exhibit
5-3?
A. 0 B. infinity C. 1
D. 2 E. 10
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22.
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As
output increases, diseconomies of scale
A. lead to
rising long-run average costs B. lead to declining long-run average
costs C. lead to rising short-run average total costs D. lead to
declining short-run total cost E. lead to declining long-run marginal
costs
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23.
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Doubling the circumference of an oil pipeline more than doubles the volume of oil that
can be pumped through. This is an example of
A. production inefficiency B. diminishing marginal
returns C. diseconomies of scale D. constant returns to
scale E. economies of scale
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24.
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The
minimum efficient scale for a firm is the
A. lowest
rate of output at which long-run average cost is at a minimum B. lowest rate of
output at which short-run average total cost is at a minimum C. lowest rate of
output at which short-run average variable cost is at a minimum D. average of the
rates of output at which long-run average cost is at a minimum E. average of the
rates of output at which short-run average total cost is at a minimum
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25.
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In
Exhibit 0103, diminishing marginal returns set in with the addition of the
A. first
worker B. third worker C. fourth worker D. fifth
worker E. seventh worker
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26.
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For
each size of plant a manufacturer could build, there is a different
A. long-run
average fixed cost curve B. long-run average variable cost curve
C. short-run average total cost curve D. long-run average total cost
curve E. long-run marginal cost curve
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27.
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The
relationship between average and marginal variables can be stated as follows: if the marginal is
greater than the average, then
A. the average is increasing
B. the average is decreasing C. the marginal is increasing
D. the marginal is decreasing E. the total is decreasing
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28.
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In
Exhibit 0106, what is fixed cost at 15 units of output?
A. $0 B. $10 C. $30 D. it is
impossible to calculate fixed cost unless we know the daily wage E. it is impossible
to calculate fixed cost unless we know variable cost at Q = 0
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29.
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In
Exhibit 0106, what is the marginal cost of the 15th unit of output?
A. $30 B. $10 C. $1
D. $20 E. it is impossible to calculate marginal cost unless we know the daily
wage
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30.
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Experimental evidence suggests that
A. markets quickly adjust to equate quantities demanded and
supplied B. markets often do not adjust as quickly as economists previously
believed C. large numbers of buyers are necessary in order for a market to
behave competitively D. large numbers of sellers are necessary in order for a market to
behave competitively E. large number of buyers and sellers are necessary in order for
markets to behave competitively
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31.
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Allocative efficiency occurs in markets when
A. marginal
benefit and marginal cost for the last unit sold are equal B. resources can be
reallocated to increase the value of total output C. goods are produced at the
minimum of average total cost D. goods are distributed evenly among
consumers E. government establishes price ceilings below the market
price
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32.
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A
horizontal long-run industry supply curve occurs under conditions of
A. economies of scale B. diseconomies of scale
C. monopoly D. increasing costs E. constant
costs
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33.
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A
perfectly competitive firm faces a horizontal demand curve because
A. it is so
large relative to the market as a whole that it controls the market price B. it is
so small relative to the market as a whole that it has no impact on market price
C. it produces a good for which there are no substitutes D. it produces a good
for which there are no complements E. it produces a good that no other firm in the
industry produces
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34.
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A
perfectly competitive firm's profit per unit of output equals
A. price
minus average variable cost B. price minus marginal cost C. total
revenue minus total cost D. price times quantity E. price minus
average total cost
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35.
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If
the price-taking firm in Exhibit 0126 is currently producing 6 units, then to maximize profits (or
minimize losses) in the short run, it should
A. keep
producing 6 units B. increase production to 12 units C. increase
production to 14 units D. increase production to 8 units E. shut
down
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36.
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In
Exhibit 0127, price equals
A. $28 B. $12
C. $40 D. $20 E. $24
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37.
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At
the profit-maximizing output level, the firm represented in Exhibit 0127
experiences
A. a loss of $3,200 B. a profit of
$1,600 C. a profit of $1,200 D. zero profit or loss
E. a loss of $800
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38.
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Consider Exhibit 0135. Assume the firm is perfectly competitive and the market
price is $21. To maximize profit or minimize loss, the firm will
A. shut
down B. produce 7 units C. produce 3 units
D. produce 4 units E. produce 5 units
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39.
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Assuming all of the firms are identical, how many firms are in the industry before and
after the demand shift depicted in Exhibit 0136?
A. Fifty
firms are in the industry before and after the demand shift. B. Forty firms are in
the industry before the demand shift; after the shift, the amount can't be determined.
C. Fifty firms are in the industry after the demand shift; before the shift, the amount can't be
determined. D. The number of individual firms cannot be determined from the
information given. E. The exact number of individual firms can't be determined, but
more are in the industry after the demand shift than before it.
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40.
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The
increase in demand shown in Exhibit 0136 increases each firm's total
revenue
A. from $8 to $12 B. from $16,000 to
$30,000 C. from $40 to $50 D. from $320 to $600
E. by an unspecified amount
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